The UK and EU were on Wednesday night poised to strike a post-Brexit deal that would define their future trading relationship, reducing the threat of Britain crashing chaotically out of the European single market on January 1.
Both sides said they were on the cusp of signing off the deal, which was concluded in a flurry of final negotiations in Brussels on Wednesday after nine months of often tense talks.
Legal teams from both sides were poring over the fine print for an agreement UK prime minister Boris Johnson insisted would secure British sovereignty while maintaining strong access to the EU market. A deal was expected to be confirmed on Wednesday night or Christmas Eve.
“We are in the end game,” confirmed one EU official. It would be the biggest trade agreement signed by either side, when measured by the size of the £668bn trading relationship.
The breakthrough came after Ursula von der Leyen, European Commission president, and Mr Johnson took personal control of the negotiations, with fishing access the last big sticking point.
The deal taking shape in Brussels would preserve tariff-free EU-UK trade for goods as well as cover issues such as police and security co-operation and the cross-border energy market, but does little for trade in services.
Crucially the agreement would provide a legal platform upon which the two sides could rebuild relations after the traumatic Brexit divorce, which followed Britain’s vote to leave the EU in 2016.
If the deal is finally signed off, there will be a rush to approve the agreement before Britain’s transition period ends on January 1; British MPs have been told to expect an emergency session of parliament on December 30.
The European Parliament has already said it will not ratify a deal before the end of the year, meaning that the treaty would need to be provisionally applied until MEPs vote on it in early 2021.
The trade deal would soften the economic edges of Brexit, but trade between the two sides would still be hit by a huge amount of new paperwork and border checks following Mr Johnson’s decision to take Britain out of the single market and customs union.
Covid-19 and the end of the UK transition period mean that considerable disruption at ports on January 1 remains likely, but most MPs and economists agree that a free trade agreement — even a relatively “thin” one — will help ensure that a bad situation is not made far worse.
Sterling jumped on Wednesday, advancing 1.2 per cent to $1.3515 against the dollar and 0.8 per cent against the euro to €1.107.
The successful outcome was only reached after talks went to the brink of failure in recent weeks, with Mr Johnson warning as recently as December 11 that the negotiations were “very, very likely” to fail.
The British prime minister insisted the deal would preserve British sovereignty and allow it to break free from the “lunar pull” of Brussels. Most Tory MPs are expected to support the agreement and the Labour opposition is also likely to back the accord when MPs vote on it.
The text preserves some EU fishing rights in UK waters for a five-and-a-half-year transition period but pares back quotas, according to EU diplomats. The deal would see Britain’s share of the catch in its own waters increase during the transition period.
A new arbitration mechanism would be created to guarantee a “level playing field” for competition between the two sides, with provision for sanctions in the form of tariffs if either side seriously undercut the other’s regulations.
Mr Johnson will claim that this mechanism allows both sides to diverge — Downing Street has already dubbed it “the freedom clause” — and will not involve any role for the European Court of Justice. The EU will argue it will be able to hit the UK with sanctions if the disparity becomes too great.
Despite the trade deal, old rights to travel freely and seek work abroad will be replaced by more complex and restrictive arrangements. Britons will lose European freedom of movement rights, as the UK government devises a new immigration system.
